What is a service?

Product Service System (PSS) is when a firm offers a mix of both products and services (or just services), in comparison to the traditional focus on products. Today more and more companies are moving towards service-driven business models. This is a trend in all industries (Neely 2011). The trend is called Servitization of businesses (Vandermerwe 1988). The trend is, among other things, driven by the need to avoid competing with low cost countries on a cost alone basis.

Examples of companies moving to a product service system are: Rolls Royce who offers air engine flight hours rather than selling jet engines and spare parts. Husqvarna who offers a fleet management service for managing lawn movers and other garden products to companies maintaining lawn and garden areas (i.e. parks) from only selling physical products.

Software industry is no exception (Sultan 2014). The software industry is changing from offering software products to offering a “product-service system” (PSS). One of the enablers behind the servitization trend is the emergence of cloud technology that gives servitization a much more flexible cost structure, scalability and efficiency (Sultan 2014). Examples of software intensive product-service companies are: Facebook, Amazon store and Twitter.

For traditional product companies very often introducing a service is software intensive. So companies that did not use to understand or have a lot of software engineers, now need to build up this competence. Examples of such companies including: Husqvarna.

Another trend in the industry today is the huge amount of data that is created today. This is among other things due to the Internet of Things, where billions of sensors produces data streams in a never ending way. Internet of Things is not about things, it is about services! Companies that can make a service using the data in new creative ways, are the ones that will succeed. Value is created by making sense of data, turning it into knowledge and meaningful action. It’s not the parking sensor that matters, but finding a free parking spot quickly and without frustration.

PSS can be split up to three different types:

·         Base Services: this is when the tangible product is shipped to the customer, but additional services, such as maintenance, is provided. One example of this is you buy a washing machine, and the washing machine company offers maintenance on the washing machine as a service offer.

·         Intermediate Services: this is when the tangible products is kept by the service provider. The service provider is then selling the function of the product. The distribution and payment systems have to be updated to suit the new business model. One example of this is Microsoft Office 365. In the case with the washing machine, now the washing machine company owns the washing machine and sells washing hours to you. Washing machine company provides the maintenance on the washing machine without consulting you. 

·         Advanced Services: this is when a product is replaced by a service. One example of this is answering service replacing an answering machine. Netflix is another example, offering the service of streaming movies and TV shows, instead of selling the DVD with the movie.